The city of Minneapolis is rolling out the Business Recovery Loan Program, which is aimed at helping local businesses land loans of up to $5,000. And the Small Business Administration this week opened a temporary office where it’s offering bigger loans to local businesses and homeowners.

SBA, city loans fill gaps for Minneapolis tornado recovery

At Lucy Laney Elementary School, 3333 Penn Ave. N., Sharon El-Amin (center) came on Tuesday to register for loan assistance after her restaurant, El-Amin’s Fish House, was damaged in the May 22 tornado in north Minneapolis. (Staff photo: Bill Klotz)

Sharon El-Amin is worried that business at her El-Amin’s Fish House is too hot.

Literally, too hot after the May 22 tornado that struck north Minneapolis tore out her restaurant’s rooftop air-conditioning system, leaving her facing a replacement cost of up to $10,000 — with no insurance and thus far no loans to pay that bill.

El-Amin reopened the restaurant two weeks after the storm. Like several north Minneapolis restaurant owners, she cooked and gave away all her perishables in the days after the tornado.

But summer months have turned the kitchen and dining room steamy and depleted sales. “I worry about my employees — everybody’s in a sweat box,” El-Amin said. “But when it’s this hot, customers don’t want to come in either.”

El-Amin’s story is common on the north side. Businesses are putting the pieces back together slowly, but the tornado’s impact is still felt widely, and in a largely low-income community the resources to rebuild are not meeting the needs yet.

Those resources are beginning to grow. The city of Minneapolis is rolling out the Business Recovery Loan Program, which is aimed at helping local businesses land loans of up to $5,000. And the Small Business Administration this week opened a temporary office where it’s offering bigger loans to local businesses and homeowners.

When north side business owners go searching for a lender to help them rebuild or recoup losses, they face high credit hurdles, said Bob Lind, who leads business financing for Minneapolis’ Community Planning and Economic Development department. Many have little collateral; they do not have years of financials to show or credit scores high enough to obtain a bank loan, which are required for conventional credit.

The Business Recovery Loan Program lowers the credit standards on loans of up to $5,000. The program enables business owners who have suffered losses to storms or other disasters to postpone repayments for six months. If they stay in the city for three years, they can write off close to half the loan, Lind said.

“We work with businesses all the time that aren’t bankable, and we’re trying to help them become bankable. That’s what we’re seeing in the businesses on the north side now,” Lind said.

Interest rates are pegged at 4 percent, and Lind said the city has the money to make 20 to 40 loans to north side businesses.

The loan program is “a great start,” said Kenya McKnight, operations director at the Northside Economic Opportunity Program (NEON), which is advising many of the businesses that suffered damages from the tornado. “Before this, there wasn’t any lending available to help many of the businesses we’re seeing,” McKnight said. “The city’s been very flexible in putting this together, and we hope more participants can come along and expand this.”

The need is high. According to a NEON survey this month, 179 out of 208 businesses in the affected area suffered damage to their buildings, or lost inventory or revenue to the storm. Total losses are estimated at about $2.7 million, and that’s probably on the low side, McKnight said. For one thing, interviewers were unable to find several owners whose businesses are still closed, she said.

And most of those business owners were facing the storm losses on their own; only 88 had business or renters insurance.

The small loans from the Minneapolis program will be invaluable for many of the small businesses that NEON surveyed, paying off the losses from perishable inventory or covering the high deductibles that some of the insured businesses had to pay, McKnight said.

The city also deserves credit for launching the loans despite losing $200,000 the Minnesota Department of Employment and Economic Development had promised — which was stalled by the state government shutdown.

But Minneapolis’ initiative doesn’t offer help to businesses with larger losses to their buildings or large capital equipment, such as El-Amin’s $10,000 air-conditioning system.

Help may be on the city’s doorstep, though. The U.S. Small Business Administration is offering disaster relief loans to local business and homeowners from a temporary office it opened on Tuesday.

Business owners can borrow up to $2 million at 4 percent interest, with a 30-year term. Those loans are available until Sept. 6.

“We can be more lenient than banks on these loans,” Young said. “We look at credit scores but we don’t have a minimum, and we aren’t going to decline a loan because the owner doesn’t have collateral. We’re looking for any evidence owners can provide that they can repay the loan.”

One of the first borrowers in line at the Tuesday opening of the SBA office was El-Amin, along with Mariana Scott, who counsels small business owners like El-Amin for the Metropolitan Economic Development Association (MEDA).

Scott was hopeful that the SBA’s disaster program would in fill in that gap left by the city, providing loans for larger repairs and investment. “The SBA people I’ve talked to said they’re not basing loans on credit score minimums or collateral, and that’s usually a roadblock for loans in this demographic,” Scott said. “These businesses are creating employment on the north side, but they require flexibility.”